GlaxoSmithKline considers outsourcing deal

Pharmaceutical giant GlaxoSmithKline (GSK) is in talks with suppliers to outsource all of its global IT functions in a £1.5bn 10-year deal.

The company is looking to slash £45m a year off its almost £200m annual IT budget by handing over its worldwide IT infrastructure - which covers up to 70,000 desktops - to one supplier in a long-term deal.

Talks have dragged on for eight months already and, although no decision has yet been made by GSK, it is believed that the deal is likely to be concluded early next year, potentially leading to hundreds of UK jobs being lost.

A spokesman for GSK declined to comment on the size of any potential deal, but said the company is in ongoing talks with suppliers and no decision has been made yet. However a source said the figures were accurate.

"The company has made use for some time of external suppliers for IT requirements and this is for efficiencies, costs and quality," he said.

"We have asked a number of suppliers for suggestions and we have regular contact with these companies."

Commenting on the deal, Robert Morgan, chief executive at outsourcing consultancy Morgan Chambers, suggested that GSK should be targeting much higher savings from such a large deal.

"The overall savings GSK is looking at are under-optimistic. It really isn't a lot when you consider its IT budget," he said.

"Typically of a contract of this size, especially where there are duplicated systems from the merger, the company really should be looking at about 35 per cent savings a year on the IT budget. You can take 25 per cent out just from merger efficiencies."

Anthony Miller, principal analyst at Ovum Holway, added that, although large long-term single vendor deals are on the decline, there are still significant ones up for grabs.

"There are still a number of mega deals out in the private sector and they are going to be fiercely fought over," he said. "There are only really a handful of players that could take this on, and IBM and EDS are number one and two."